Explanatory Statement under Companies Act, 2013

11 March 2014 • CS Samrish Bhanja


Explanatory Statement under Companies Act, 2013

11 March 2014 • CS Samrish Bhanja

(Amended upto June 5, 2015)


As you are aware that the Ministry has now enforced 98 sections of the Act vide notification dated September 12, 2013. The said sections have come into effect from September 12, 2013. One of the enforced provisions is Section 102 dealing with Statement to be annexed to the notice calling general meetings for every special business [corresponding to section 173 of the Companies Act, 1956 (1956 Act)]..

What it requires additionally is the disclosure of not only the names of the interested parties but also the nature and extent of interest of directors, managers, key managerial personnel (KPM) and relatives of directors, manager and KMP in the explanatory statement to be annexed for every special business in the notice calling general meetings..

Moreover, if any item of special business to be transacted refers to any document which is to be considered at the meeting then the details of time and place where such documents can be inspected shall also be mentioned in the explanatory statement given for that special business.

The basic idea behind giving explanatory statement is to provide the shareholders with all the necessary information and facts so that they can make an informed decision.

If any director, promoter, manager, KMP or any of their relatives accrue any benefit due to non-disclosure of interest in the explanatory statement then such person shall hold such benefit in trust for the company and compensate the company to the extent of benefit received by them.

Exception to Requirement of Sending Explanatory Statement:

  • There is no need to annex the explanatory statement to the notice of an EGM convened by the requistionists.
  • Section 102 shall not apply to private companies if articles of the company provide so.



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